Nifty was in a confused box just two days ahead of expiry but bulls took it over at the last moment to prove Positive divergence as i mentioned before.
Though after yesterdays Dragon Fly Doji on Daily chart of Nifty many would have initiated a short trade…. Am i right??…But i didnt….Why and how did i get right?…because this was the perfect example of a Right candle but at a wrong time! Which means that a Dragon fly doji has most significant Only if its at the top of a previous rally and we were nowhere near top yesterday. So frankly speaking it would have been like burning fingers against the trend for short term traders. Though it doesnt mean long term trend has been a turnaround…This rally is just a short covering as i mentioned before. On The upside now we have strong resistance near to 200 Day sma at 8252. So short term traders should start booking on my long calls in the range of 8200-8250 in intraday…..
P.S. Strategy remains the same as last post…here is the snap…!!
Nifty has been pretty volatile in the range of 7900-8300 but the strategy is working well for the spread traders as i recommend in the previous post: ” Go long on stocks and short on index for next two expiry”…..And even long term investors are safe as they were recommended to buy PUTs on each rise…but short term traders Burnt fingers as stop loss was triggered at 8088!
Today, after a strong short covering move on Nifty, still we are in a Confused Box of Technical signs!
As you all could notice with the Green Trend line with today’s low, we have got positive divergence on Nifty which is a good sign of short covering. Even the options suggest that next two days can be for the bulls after a long time. But i am not convinced thoroughly with Candle stick pattern for a strong reversal. Even all short term moving averages have given a bearish cross overs to a larger degree of Moving averages signalling that yet the move is not completely in hands of Bulls. On the upside of the box we have 200 day SMA at 8252 which could act as a strong resistance for short covering.
Even on the fundamental side, we may get some boost from news and FII before budget as the stocks are much undervalued but the quarterly results would surely drag Nifty to last lag of correction before we completely take a U-turn towards new high. So Long term investors shouldnt chip in a hurry for Jan rally as this is just a relief rally for Bulls while investors will surely get a better chance after Budget and before March ending.
So strategy still remains the same:
Short term traders: Go long with Stop loss of 7920 and Target 8250
Safe traders: Buy PUTS for February on each rise with Stop loss of 8720
Spread Traders: Go Long on selective Stocks and Short on Index
Markets have been playing between Demonetization and Global Rally, making it difficult for Analyst like me. Though until now it has been perfectly moving as i predicted in last few posts but still traders want me to give them exact point of Trades on #Nifty and am sure other analyst friend out there would agree with me that is difficult to always pick right levels. So we can always give you “Probability ” and not “Surety”. This time too i have got 4 Probabilities from this level on Nifty which is 8261. Current rally on Nifty could be either Short Covering or 5th Wave rally which could give us new high but confirmation could be done after we resist at some “Peak” ahead.
So this current rally could stop on 4 points on the upside: 8320, 8440, 8566, 8720. But i would give most likely PEAK to 8440-8566 as its they are levels also suggested by Open interest side too. Technically both levels are 50 DSMA and 100 DSMA too making crucial resistance levels. Where as second most likely peak could be 8320 which is small channel resistance on daily charts while the rarest possibility is 8720 which is a Fibonacci retrenchment level.
Conclusion 1: Rally is most likely to resist near to 8440-8560
What next after likely resistance at 8440-8560? Now the downside we can get two possibilities: 7640 and 7400. For me most likely target is 7640 because if market resist on any of my likely level, 8440 or 8560, it is the predictable target from both. But in the extreme fundamental effect of Demonetization 7400 could also be achieved which is a Fibonacci level and also Support at a trend line intact since the low in 2009. Trend line has been tested successfully 4 times before making to cemented low for this rally.
Conclusion 2: Possible Downside target 7640
Now taking into consideration that Nifty would resist to 8440-8560 and would resume downside for 7640, the best strategy would remain as my previous post “Can 3:30pm tomorrow be a morning for traders ?”
Snapshot of strategy
So for short term traders playing this rally on long side , stop loss is 8088 as mentioned above which is 50 weeks average
For Safe traders hedging portfolio with PUTS as mentioned above would have stop loss at 8720 which is fibonaaci turning level
For spread traders remain with buying stocks and selling index as short covering on Stocks could be fast and furious. …….
See you guys then at 8088 or 8440-8550!
Ah….you might be thinking that i have gone nuts…”how can a afternoon be a morning”???…But for Nifty Traders that can come true….Tomorrow being a weekly close, i just spotted a possible reversal pattern on Nifty Weekly charts which is known as Morning star pattern but the close tomorrow would be the game decider. Lets first look at the following weekly chart
I noticed few interesting things on Nifty weekly charts which supports short term view for covering recently lost ground. Lets first talk about Morning star pattern which has made my headline today. Though the formation is not the text book one but we may still get it too close. In the pattern first candle we need deep red (8288-8048), Second candle should be lower than the first candle and preferably it should be a Doji (8122-7916 and a Dragonfly Doji) and the third candle should trade above second one completely and close atleast 50% into the first red candle..(8080-8168 ?) . So for the pattern to be true we need a close above 8168 tomorrow which is quite possible. Secondly, Nifty has been taking closing support above 50 Weekly average (Pink line which is at 8088) since recent two close and close its intact as support since May 2016 which fuels are biased view for short covering. Thirdly, Looking at indicators such as Weekly RSI, we are oversold and healthy short covering would be better before moving towards last lag of profit booking on Index.
So the targets for short covering moves are 8450-8550!!! “why i still call it a short covering move???” Because my medium term is still of a bearish as i have been posting in my previous posts “500/1000 points to be sucked out of Nifty?”
Now let me take you to a tour of Nifty Daily charts which would give us more strong reason why its just a Short covering and not a rally?
Just one big reason which is supporting my view of a medium term bearish trend is ” Negative 50 day cross over 100 day average as circled” Moving average crossover is the most effective tool i have came across for medium term trend crossovers.
So the strategy is simple:
For traders: Go long on Nifty with stop loss at 8088 with short term targets of 8400/8500
For Investors/Medium term traders: Sell on rise as mentioned in all my previous posts with SL of 8700 with tgts 7800/7670/7450 for next two expiry
For Spread traders: Go long on stocks and short index for next two expiry
Anyways see you guys soon after we near the end of short covering move!! Trade with strict stop loss on both sides…..!!